As described in the ProcureCon CPO study 2022, the evolving business landscape necessitates a fresh approach to procurement, a function that has grown increasingly important in organizational strategy and success. Recent trends indicate a shift towards a more strategic role for procurement, particularly in areas of sustainability, digital transformation, and financial management. The central player in this transformation is the Chief Procurement Officer (CPO), whose role has expanded in scope and strategic importance. The interplay between procurement approaches and sustainability goals, the role of technology, the challenges faced by CPOs, and the value of business process outsourcing all feature as key focal points in the ongoing evolution of procurement.
Highlights from the Evolving World of Procurement – reflecting on 2022
- A prominent challenge in many organizations is a disconnect between C-suite sustainability goals and procurement approaches, underscoring the need for improved alignment.
- Embedding continuous ESG (environmental, social, and governance) insights into organizational goals and KPIs can enhance procurement strategies and help align them with broader sustainability goals.
- CPOs have transcended traditional roles and are now strategically involved in financial decisions and technology upgrades. In doing so, they have transformed procurement functions to generate substantial company revenue.
- Focus areas for CPOs include process improvement, minimizing supply chain disruption, and improving sustainability.
- CPOs face significant challenges in securing buy-in from other decision-makers for major transformation initiatives and managing supply chain disruptions caused by the pandemic.
- Integrating new processes and technology poses a substantial challenge, particularly when dealing with legacy systems.
- CPOs need to master skills like financial analysis, negotiation, and flexibility. Additionally, they must bridge departmental divides and secure necessary resources by presenting solid business cases for new initiatives.
- Procurement teams appreciate technological solutions such as cloud-based procurement platforms, procure-to-pay solutions, tax technology solutions, and workflow automation options that eliminate manual processes and improve efficiency.
- A considerable proportion of organizations are planning to transform their procurement functions in the next two years. They anticipate needing new tools, strategic partnerships, or third-party providers to facilitate these transformations.
- A significant number of CPOs seek assistance in identifying opportunities, help with staffing and recruiting, and support in obtaining organizational buy-in to generate additional value from procurement.
- Business Process Outsourcing (BPO) has become increasingly important for agile procurement teams. Satisfaction with current BPO partnerships varies, with desired key services including compliance tracking, supplier performance management, and sourcing support.
- Most executives have tied their procurement KPIs to the organization's ESG goals, but a few have not, often due to a lack of resources. Interestingly, strong ESG policies appear to correlate with positive returns for the business.
- The role of CPOs has evolved significantly. Many of them now play a primary role in driving technology and transformation goals, reducing complexity within the organization, and taking the lead in digital transformation.
- Key recommendations for improvement include arming CPOs with evidence of the benefits of certain investments, seeking partners for staffing and revenue operations assistance, conducting audits of existing BPO relationships, and ensuring adequate resources to support the organization’s ESG goals.
In conclusion, the pivotal role of procurement in an organization's strategy and the consequent transformation of the CPO's role cannot be overstated. As CPOs juggle the challenges of digital transformation, sustainability, and financial management, their need for support in the form of strategic partnerships, technological tools, and cross-departmental collaboration is clear. While the road to transformation may not be without its hurdles, organizations can facilitate a smooth journey by aligning procurement with sustainability goals, investing in technology, managing BPO relationships, and supporting CPOs in their efforts to drive change. As we move forward, a strategic approach to procurement, rooted in sustainability and enabled by technology, will be integral to organizational success.
